Rwanda: The Starving Bottom Billion

Monday, July 28, 2008

This week Trade Ministers assemble in Geneva to try and make progress at the World Trade Organisation on the Doha Development trade round. The global economy needs the boost that further trade liberalisation has always delivered.

However, it’s true of generals, leaders, and bureaucrats, that we fight the next war, or address the next problem based on the evidence of our last battle when things have moved on.

My experience of the 1970’s prepared me for the needs of the 1980’s. My views on how we could help the poorest nations transition using trade as an important driver for progress was based on that evidence and experience. It was correct, China and India prove this.

The historic pattern from Britain to the US to Japan to Korea was clear. At a certain stage of development, nations move to textiles then to industry, then to the service sector and new technologies. Many countries succeed in all those businesses, but move up the value chain.

It causes painful, massive relocation and re-allocation of resources, especially in agriculture. No nation has moved forward with a peasant type of agriculture. That system can’t feed us all, despite nostalgic, self-sufficient theories of hippie economists and some extreme Greens.

Anyhow, the worst living standards in the world are poor farmers with half an acre of land that they don’t own. That was the driving principle and motivation for me to launch the Doha Development round, when Director-General of the WTO. Now it will take another decade for these opportunities to be locked in and implemented.

In the meantime, things have not stood still. In the early days it was a more simple struggle to get the rich countries to open their markets to poor countries, and for poor countries to establish rules and systems to welcome investment and technology raising incomes on both sides.

The rise of China and India has been splendid, never in history have so many people been lifted out of extreme poverty. As markets open, it won’t be rich American, Japanese, or European nations that go head to head with poor countries alone.

China and India that will take up the new opportunities that would have been available to poorer countries.

Bangladesh’s textile industry went from a few hundred million dollars to several billion dollars because of the last trade round. As their markets are opened, they will see more competition from big developing countries.

Smaller nations that had privileged quotas to the US and Europe, in the Caribbean and Africa, may see some of this business migrate to big developing country players.

Medium-size, emerging powers – Brazil, South Africa, Russia that are doing very well, will see some of their new industries threatened by these emerging, economic superpowers.

Many know that if the Doha trade round is balanced, that is, agriculture is properly addressed, they will gain overall. Yet, for the poorest, smallest, most vulnerable, isolated economies, the traditional paths of development, i.e. textiles to industry and manufacturing, to service industries, is a road they cannot now travel with the same historic ease.

Many have actually gone backwards over the past decade, but that’s got nothing to do with trade, it’s the opposite, the lack of trade and good governance. Unlike Korea or Japan, there will not be a Nigerian motorcar industry, even the Malaysians had a costly failure there.

As wages rise, labour shortages emerge in the major developing countries, as they are, there will be some openings, and jobs are now leaving China for Africa and Vietnam.

All this is not to suggest further trade openings is not good for the world, it is. What’s to be done so these people and places can join in the growing wealth of the world?

We need to give these people hope and ownership so the most ambitious don’t have to flee their dreadful conditions, as have a million Cubans, millions of Zimbabweans, and millions of Afghans.

Wicked leaders and civil war are the biggest contributors to these countries’ agony. All societies were once very poor, most nations have lifted themselves out of the poverty cycle, so the answers are not new.

It’s the rule of law, property rights, open trade and societies, independent courts, a professional public service, investment in education, health; competition and accountable leaders.

Rich countries can help build their domestic capacity and remove costly trade restrictions. Yet, unless the trade round is successful, no-one, even the bottom billion, can have confidence in a growing, more equitable global system. That’s why this WTO Ministerial meeting is important to everyone.